Business in Indonesia: Why don't many big software companies open offices in Yogya and Bandung, compared to Jakarta?

Above all, there must be demand. These cities may have good qualities, but if there is no business to be made, software companies will be reluctant in setting up shop. Yogyakarta and Bandung are home to almost entirely local companies which do not have sufficient complexity in their business processes to require the use of sophisticated software.

I think it is because their customers are in Jakarta. Especially when these big software companies are dealing in business-to-business transactions. When I was interning in Microsoft, I learned that most of Microsoft's customers in Indonesia have offices/headquarters in Jakarta in which most IT operations of those businesses is also located. The offices in Jakarta are usually where the decision makers work as well, so, purchasing decisions will be made here. Several outlier customers are mining and oil and gas companies whose offices can be in Kalimantan, Sumatra or Papua. But even to capture that opportunity, the software companies don't need to set up new offices in those places because it will not be cost-effective.

This is hard question. I'm no specialist here. But I believe that my answer is not so stupid here. I believe this question is valid for any kinds of business in Indonesia as well. Jakarta urban area (means: Jakarta + its suburb) has economy of scale unmatched by any other cities in Indonesia. Its population (according to http://en.wikipedia.org/wiki/Greater_Jakarta) is 28 millions. This is more than population of the whole Australia and almost equal to the population of Malaysia. And the best and brightest in Indonesia (if they don't go oversea), they will usually go to Jakarta urban area. Prestigious jobs in Indonesia are also heavily concentrated in Jakarta urban area. I also heard that graduates of best universities outside Jakarta will go in drove to Jakarta once they graduate. Just a personal story, I have some relatives who was born and grew up in outlying area of Indonesia, they did well in school (outside Jakarta), and they got good job, ..., in Jakarta. The kind of job they got is virtually impossible to get outside Jakarta area. Considering that the best employers and the best employees are heavily concentrated in Jakarta, it makes much sense to go to Jakarta. Everyone in Jakarta hates its traffic jam, lack of greenery, and horrendous public transportation, no doubt about that. But that's where the money is. This imbalance problem has actually been haunting Indonesian policy makers since time immemorial, but either they don't care about it, or they can't solve it.

I have working in web development for 9 years inside and outside Yogyakarta, in my experience there are some other company try to create their production house (development team) in Yogyakarta, but their business development (such as for marketing) outside Yogyakarta. Yogyakarta has many talented programmers, but, actually there are almost no rewards for programmers, although not every software company like that.  Low salaries but with a very high software tasks, this situations make many programmers try to go out of Yogyakarta, try to find more interesting salaries out there or maybe become a freelancer, so actually, many software companies here have a difficulty too to get a good programmer.

Well, it is quite simple actually: all the clients are in Jakarta. I work for media marketing company, they don't lay their eyes for another cities because they only deal business with the holding company, or at least the main company that hold the full authority to decide whether to use their service or not (as part of their business strategy)

It is not only about the talent, lower living cost, etc. It must be depending on a significant motive(s), whether an ulterior one or a revealed one. It could be a client, a timezone, or anything. The only reason why the company, which is currently employing myself, sets up a software development office in Jakarta is having a customer in Jakarta. This customer/client is significant enough to contribute for the growth of the company (this client set up as an example of success case for implementing our software in SEA/APAC region) . The relation is not only just about the growth of the company but it is also about the continuity of service to this customer and making customization to follow its growing business process. Instead of importing so many expats, they choosed to set up a Jakarta office to serve locally. A similar motive that I found from a company founded by an Australian in Indonesia. This company set up offices in Bali since the close proximity of the island to Australia mainland and its GMT +8. They eventually set up an office in Bandung and Jogjakarta. Again, the reason is not only about the cheaper talent, but it is also they have significant clients to be served locally either in Bandung or Jogjakarta. and why is Jakarta attractive? Well, it has been a melting pot for a long time. Anything that you want to seek across Indonesia is easily found here. The city has its own right to brag about its Big Durian nickname. Unfortunately, this kind of magnitude is not shared evenly to other cities.

Running a business within the IT industry requires one fundamental needs, reliable internet connection. Among those city mentioned, Jakarta so far the only city in Jakarta that has the greatest internet penetration.

It depends on the office's purpose: is it to develop the business or simply used as a production/development place? For the business development you need to be close to your clients and potential customers, and you need to be close to your suppliers too. This is why it's crucial for big businesses, including software companies, to open their office in Jakarta, as it holds a large business opportunity. So it's not about the availability of good talent or good infrastructure, but more on whether there's good market for your product/service.

because of the market.. big software companies naturally try to sell their products to large corporations or government agencies.  These enterprises have their head offices in Jakarta and in those head offices, the strategic buying decision are made.  So that's explains.  The seller has to be close to the buyer.  Hence, they always open their offices in Jakarta.  Once the sale is made, work can be performed by anybody regardless their location including employing best talented software engineers in other cities.